Category Archives: Investing/Financial Planning

Last week we started our tax season discussions here (- the HSA) with a favorite “Last Year” tax savings ideas that can be done this year …

This week another super saving idea … Think of this as an IRA on steroids – due to high limits and ample flexibility!

The SEP – Simplified Employee Pension

Here are just a few reasons why we love the SEP for the correct situation:

Offset 1099 or other consulting like – non W-2 income in a pre-tax form

An IRA can be used to accept a SEP contribution in many cases – no new account needed

Can be used in conjunction with a 401k – Only need 1099 income – High Contribution limits apply

High Maximum Deferral amount $54k – yes that is correct FIFTY FOUR THOUSAND of pre-tax dollars as long as that is no more than 25% of Adjusted Gross Income

Can make SEP contributions even after RMD (Required Minimum Distributions) Begin

Can make your contribution even after the regular tax deadline if you file an extension – This really makes a SEP valuable and give us plenty of time to make the contribution again for LAST year’s tax savings

There are certain limitation and restrictions as mentioned, so don’t just make a contribution unless you are sure it will work for you … or just reach out to us!

After a long lethargic flat-lined Capital Market of 2017, things have finally changed, and we need to begin to get used to more normal Capital Markets.

What follows are details of what the Capital Markets have done over the last few days (yes only days) … what we should expect moving forward, along with a review of similar historical movement. Given a future that Rhymes with the past, the most important point we want to get across is this —

What we want everyone to understand is it is highly likely we do not just bounce right back and go to highs again quickly, so let’s have patience and set our expectations for an extended Capital Market search for the most appropriate level.

Ok, so you have the most likely scenario, here is why.

Current Capital Market Review

Suddenly the Capital Markets cared about something — and were WAY ahead of themselves, so they began going down!

We thought they might stop at our fancy trend line from our early post on this subject.

Nope …. participants pushed on past the trend line.

Participants decided the 200 Moving Day Average was where they should stop …

So we have a stopping spot, what happens next may be best seen by looking at the past for a possible rhyming future.

2016 Rhyme

The first drop was about 24 trading days followed by another 20-25 day test in a few months.

Start to finish about six months with a move all the way back to even before a second drop.

2012 Rhyme

With two hiccups during this 2012 time frame, again our weekly charts show a 2-4 months of capital market footing discovery ….

Let’s settle in for more normal, but what feels like “Rockier” times, which will likely be with us for a while.

These Brief Multiple Part Posts are unique in that they give us ideas on ways to help our taxes for last year (2017) but can be completed now … in 2018!

Let’s Begin, in no particular order of ideas … but hopefully several that will save you Tax Dollars!

Health Savings Account (HSA)

Summary –

HSA is a pre-tax deductible plan for those with high deductible health insurance coverage

Contributions can be made in the current year for prior years taxes

Distributions for Qualified medical expenses are NOT taxable

Deferrals grow tax free and do not have to be used annually

Most plans have investment options

Can only contribute until age 65

THE HSA

HSA’s are available to anyone with a High-Deductible Health insurance plan.

The best way to find out if you have the ability to do an HSA is to check with your Health Carrier.

Here are the current limits from one of our favorite HSA Providers: HSA Bank

Frequently employers may contribute towards some of these amounts. If the employer does not contribute the maximum, you are free to add your own personal “Tax Deductible” contribution … yes that is correct, the HSA is Tax Deductible.

Not only is the HSA Tax Deductible, but it is one of the few items that rarely phases out due to a big income year.

But Wait … there is more…. Unlike many pre-tax health plans, the HSA does not have a use it or lose it feature, meaning you can save it for future use … a feature we like as medical expenses are likely to be with us in the future at a greater level.

Most plans also have an investment feature as well, making the tax deduction, and deferral all the more advantageous.

Age Limitation – Age 65 –

Under current law, you may only make HSA contributions while you are age 64 or less. The month you turn at 65 your HSA contribution will be pro-rated for that year.

Reach out to us with any questions on this …. More of these last year tax savings ideas to come!

A large wave of 1099’s have just been released and are on their way to your mailbox even if you have electronic delivery of all other items…

While less frequent than in past years, corrected 1099’s do occur….

We would be careful in filing your taxes at least until the first corrected round occurs… which will be a few weeks!

Test and Re-Test

The Capital Markets are trying to figure out what level they should be at. As mentioned earlier this week, we got WAY ahead of ourselves…

There have been some silly products that have also caused extra movement in the capital markets as well.

While it is hard to believe, given the journey, we are currently very near where we started the year, BUT because we went up too far and now back down AND because it is human nature for un-comfort to feel much stronger than comfort, it feels much worse.

More on this in greater detail next week.

No travels this weekend as the Tournament is here.. yaa.. our own bed and home cooked food!!

Whew… we had great feedback from Part 1 of Elon Musk and Tesla …Thanks for all the great comments…

Break In – We just had to add yesterdays launch of the SpaceX Heavy Lift off-

Pay special attention to Elon’s Tesla coming out of the shuttle at the 25 minute mark AND the incredible rockets landing on a targeted pad at the 30 minute mark … fast forward if you do not have time for the entire video, the rocket landing is INCREDIBLE ! And yes, that is a David Bowie song playing when they begin orbit!

Most of our Posts are a work in progress for 3-5 business days prior (at least, many take months) till the actual post. We started our theme of Too fast of a Pace way before the Capital Markets started pulling back the reins. We left the title on this post as an odd coincidence of good timing!

One quick note before we start.

Points Versus Percentage

It has been a LOONG time since we have had a meaningful pause in the capital markets.

While we watch all indexes but not the Dow Jones as much, we do understand that this index is one of the most watched. “The Market” in most circles means the Dow Jones .. such the reminder.

As the Dow Jones Index has risen over the last few years, a percentage move has become a greater number of Points.

Today a 2% move is around 500 Dow Points. At the lows of the great recession of 07-09 a 500 point move would have been near an 8% move … just a friendly reminder to keep things in perspective.

Whoa Baby Whoa

Don’t get us wrong, we like growth, but just like starting a long distance race too fast, this year started too fast … proving even too much of a good thing, is still too much !

The first white trend line is a high double digit (~20%) annual growth line … unsustainable in itself over a longer period. The second “Super Aggressive is an approximate 40% annual rate, only to be out done by the third trend line which is over a 60% annual clip. This last line is 3x an aggressive pace … clearly unsustainable!

It would not surprise us to rest a while … a much needed rest that is.

Oh, we have plenty of excuses (rates, hot economic numbers, Fed Reserve talk) but we think the unsustainable pace was the key

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Important Disclaimer

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investments may be appropriate for you, please consult your financial advisor prior to investing!

Background

The is the vocal portion of J.K. Financial, Inc. a Dallas Texas Based Fee Only Total Wealth Financial Planning Firm. Founded by John Kvale, a Dallas Texas Fee only Financial Planner and Total Wealth Manager.

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